US producer prices rise just 0.1 percent in July

By CHRISTOPHER S. RUGABER | August 15, 2014 | 9:04 AM EDT

In this photo taken July 18, 2014, Elaine Talicska and Tom VanOchten sort potatoes as they roll down to fill 10-pound bags for small markets at the VanOchten farm, in Hampton Township, Mich. The Labor Department reports on U.S. producer prices -- the prices that companies receive for their goods and services -- in July on Friday, Aug. 15, 2014. (AP Photo/The Bay City Times, Yfat Yossifor)

WASHINGTON (AP) — Falling gasoline costs lowered the prices that U.S. companies received for their goods and services last month, keeping overall inflation in check.

The producer price index rose 0.1 percent in July, following a 0.4 percent gain in June, the Labor Department said Friday. The index measures the cost of goods and services before they reach the consumer.

Wholesale prices jumped 0.5 percent in April, led by a big increase in food costs. That raised concerns among some economists that inflation could accelerate. But price changes since then have been mostly tame.

Consumer prices have tended to track the costs for producers. They rose 0.3 percent in June, mostly because of higher pump prices. Consumer prices rose 2.1 percent in June compared with the year prior.

The Fed targets inflation at about 2 percent as a guard against deflation, which could drag down wages and spark another recession. At the same time, the Fed wants to avoid excessive inflation and protect consumers and the purchasing power of the dollar.

Employers have stepped up hiring this year and consumers are more confident in the economy. But wage growth and spending have been sluggish. The unemployment rate, now at 6.2 percent, remains elevated compared with levels typical in a healthy economy.

Those trends have made it difficult for businesses to raise prices, because that could chase away customers. Many retailers have reported disappointing sales and profits this year.

Still, low inflation has enabled the Fed to pursue extraordinary measures to boost the economy. It has begun to unwind some of those measures, cutting a monthly bond-buying program to $25 billion, from $85 billion last year.

Those bond purchases had ensured low interest rates that encouraged investors to pour money into the economy.